Industry Participants

Structure of the Gas Industry

The natural gas industry comprises four main sectors:

Production and exploration
Transmission
Distribution
Major users and the retail sector
 

Production and Exploration

Producing fields

There are 20 fields and wells that produce gas in New Zealand, all in the Taranaki region. Production is dominated by the Pohokura field and the Maui field. Shell and Todd Energy-owned subsidiaries control the a large portion of New Zealand production.

The giant Maui gas field was discovered in 1969, and initially it offered more gas than New Zealand needed for domestic use. In the early 1980s, the government sponsored a number of large construction projects to promote economic development in the face of sharply rising world oil prices. Some of these ‘Think Big’ projects were dependent on Maui gas, including an ammonia-urea plant, the Motunui synthetic petrol plant, and the Waitara methanol plant. In addition, other types of gas demand, particularly power generation, continued to grow throughout the 1990s and into this decade.

A series of market reforms were implemented in the 1990s, which led to the gas industry moving to market-based pricing and the government reducing its previously heavy commercial involvement in the market.

In 2009, net gas production increased by 3% to 159 PJ. This increase was due to the increased amounts of gas produced at the Maui and Turangi fields and the new Kupe field.  (This information is sourced from the 2010 MED Energy Data File (published July 2010).  At the time of writing, it is the most up-to-date information available from the industry.)

Gross Gas Production by Field for 2009

Pohokura 38.3%

Maui  31.1%

Kapuni  9.7%

McKee  5.9%

Turangi  4.3%

Mangahewa  3.2%

Maari  3.0%

Tui  2.0%

Kaimiro/Ngatoro  1.0%

Rimu/Kauri  0.9%

Kupe  0.4%

Other  0.1%

Exploration

All major basins in New Zealand exhibit hydrocarbon seeps, but there has been little historic exploration outside the Taranaki basin. Even the Taranaki basin is considered lightly explored on an international scale, with one well per 72,000 acres having been drilled. The potential for major gas and oils finds in the wider New Zealand Exclusive Economic Zone (the area of sea and seabed that extends 12 to 200 nautical miles offshore) is considered high.

The government has implemented a number of measures to encourage gas exploration. These incentives, which range from tax breaks to government-funded seismic surveys, coupled with the decline in the Maui field, have resulted in a substantial increase in exploration and development activity in recent years. Exploration permits were awarded over the Northland and deepwater Taranaki Basins; successful block offers were held in the East coast and the Great South Basins; and a data package was developed to support block offers over Northland and Raukumara.   A total of 114 wells were drilled in the years 2007 to 2009.  Wells were drilled in a number of basins, including onshore and offshore Taranaki, onshore East Coast Basin, Waikato Basin, West Coast Basin, Southland Basin, and the Otago and Waiau basins.

Storage

The Contact Energy Ahuroa gas storage facility had over 4 PJ pumped into it during 2009.  This facility will support the 200 MW gas peaking electricity generation plant at the Stratford.  Ahuroa is New Zealand's first large-scale gas storage facility and has the potential to improve the flexibility of New Zealand's gas supply.

 

Transmission 

Transmission pipelines transport large volumes of natural gas under high pressure, from production fields to distribution networks or to large customers, along the pipeline.

Transmission systems generally operate at pressures above 2,000 kPa. There are over 3,500 km of high-pressure gas transmission pipelines in New Zealand. The major ones are:

• Vector’s network, which extends to most major North Island centres; and
•  the Maui pipeline, extending from South Taranaki north to Huntly, owned by Maui Development Limited.

The two major transmission pipelines operate on open access arrangements allowing all parties to ship gas through their pipelines. The Maui Pipeline is 30 inches in diameter and runs from Oaonui processing plant to Huntly. The Vector network comprises over 2,300 km of high-pressure pipeline delivering gas throughout the North Island. Other transmission pipelines are owned by Origin Energy, Shell and Todd Energy.

 

Distribution

Distribution networks transport gas from gate stations (transmission pipeline delivery points) and reticulate it into residential houses, offices, hospitals, factories, and other businesses.

There are more than 13,000 km of intermediate, medium, and low-pressure gas distribution pipeline networks in the North Island connected to the high-pressure transmission system.

There are four gas distributors: GasNet, Powerco, Nova Gas, and Vector.

 

 

Major Users and the Retail Sector

Major users

Total observed gas consumption (including electricity generation, co-generation, other transformation and petrochemical production) increased from approximately 156 PJ to 162 PJ in 2009. The change was due to the increased amounts of gas that were made available from the Maui and Turangi fields.

Electricity generation (including co-generation) accounted for about 44% of New Zealand’s total gas consumption in 2009. Contact Energy Limited (Otahuhu B, Taranaki Combined Cycle, and New Plymouth), Genesis Power Limited (Huntly, including the e3p combined cycle plant), and Mighty River Power (Southdown) are the main thermal electricity generators in New Zealand using natural gas.

In 2009, the industrial sector accounted for 27% of total gas consumption, an increase from 2008 levels, due mainly to increased methanol production.  Major users that are supplied directly from the transmission system include Methanex, New Zealand Steel, Carter Holt Harvey, Degussa Peroxide, Fonterra Co-operative, NZ Refinery Company, and Tasman Pulp and Paper. Many smaller industrial users are connected to gas distribution networks.

Gas Consumption by Sector for 2009

Electricity Generation  44.2%

Industrial  27.4%

Non Energy Use  15.8%

Residential  4.2%

Losses  4.2%

Commercial  3.7%

Agriculture/Forestry/Fishing/Transport  1.1%

Retailers and retail gas users

Retailers compete to sell natural gas to smaller gas users (including residential households, hospitals, and factories) who do not purchase directly from gas producers. Retailers effectively aggregate all the purchases of many smaller users to form a sizable purchase from gas suppliers. They also pay the transportation tariffs associated with transmission and distribution so that they can offer a convenient, bundled product to retail customers.

There are a number of retailers operating in New Zealand.  They inlcude:  Contact Energy, Genesis Energy (and its subsidiary Energy Online), Energy Direct, Greymouth petroleum, Mercury Energy, OnGas, and the Todd Energy retail brands (Nova Gas , Bay of Plenty Energy).